Economics of Agglomeration; Cities, Industrial Location, and Regional Growth.

Abstract

This book is very stimulating and contains a wide, interesting and motivated collection of models dealing with the role of space and the forces leading to, or contrasting, agglomeration. The starting point is the proof that the competitive equilibrium paradigm is incompatible with agglomeration or indeed with any relevant notion of space since its introduction implies zero transport costs in equilibrium. Consequently spatial, imperfect competition is required to study agglomeration. The book skilfully merges different branches of literature, urban and regional economics, industrial organisation, growth theory and new economic geography, to provide a unified account of the relevance of space in economics. The analysis is based on two forces: localised positive externalities, centripetal, and transport costs, centrifugal. The interplay between these two forces produces the economic landscapes, where agglomeration of cities, commercial and industrial districts and the spatial distributions of skilled workforce and innovative inputs are determined. Urban and economic history are re‐read along the same trade‐off: before the Industrial revolution there were small fixed production, and high transport, costs hence production was fragmented into many small units. After the Industrial revolution, fixed costs of production have increased while transport costs have dramatically decreased leading to a reduction in the number of operating plants and the emergence of agglomeration.

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